Pharmacopeia Inc., in its sixth collaboration with a pharmaceuticalfirm, is applying its combinatorial chemistry and high-throughputscreening technologies to certain molecular targets for the Dutchcompany Akzo Nobel/NV Organon.

The agreement revealed Friday is worth $19 million to Pharmacopeiain equity investments, license fees and research and developmentfunding. There are potentially "tens of millions" of dollars inmilestone payments also tied to the deal. In addition Pharmacopeiawould get royalties on sales of any resulting products.

Pharmacopeia, of Princeton, N.J., and Organon, of Oss, theNetherlands, didn't disclose the molecular targets they are goingafter.

Lewis Shuster, chief financial officer at Pharmacopeia, said themajority of the initial $19 million in the deal is in license fees andresearch and development funding. There are two types of potentialmilestones. Drugs developed for the particular targets in thecollaborative field could net Pharmacopeia "tens of millions" ofdollars, Shuster said. In addition the compounds developed in thecollaboration will be made available for additional assays atOrganon, which could result in separate milestones and royalties.

"When we make a library we want to get the maximum leverage outof it by getting it into as many screens as possible," Shuster said.

Just this year Pharmacopeia signed similar drug-discoverycollaborations with Daiichi Pharmaceutical Co. Ltd., of Osaka,Japan, and with Bayer AG, of Leverkusen, Germany. Pharmacopeiaalready had in place collaborations with Schering-Plough Corp., ofMadison, N.J.; Berlex Laboratories Inc., of Richmond, Calif.; andSandoz Ltd., of Basel, Switzerland.

Together the committed funding from the relationships in terms oflicense fees and research and development payments is about $58million, Shuster said. There has been another $37 million in equityinvestments from the partners, representing a stake of about 14percent of Pharmacopeia's nearly 11 million outstanding shares.Milestones related to the particular molecular targets covered in thedeals could bring in another $88 million, and milestones are openended in terms of the outlicensing of libraries.

Pharmacopeia on March 31, 1996, reported $76.7 million in cash andequivalents with a net loss for the quarter of $2.6 million. Thecompany's stock (NASDAQ:PCOP) was taken public in December1995 at $16 per share. It gained $1.38 Friday to close at $23.25.

Pharmacopeia's core technology is its Encoded CombinatorialLibraries on Polymeric Support, which involves development of aprocess of solid-phase synthesis and the use of microscopic beads tohelp identify the structure of a compound. The company can create alibrary of more than 100,000 compounds attached to the beads. Toidentify a compound's structure on a bead researchers use a set ofinert chemical tags that encode a series of chemical reactions eachbead has experienced. The tags then are read and the activeingredient is synthesized on a large scale for additional testing.

Driek Vergouwen, managing director of research and development atOrganon, said, "Increasing the chance of success in our drugdiscovery and optimization program is essential for Organon'scontinued success in the science-based innovative pharmaceuticalindustry. Therefore, acquiring access to the combinatorial chemistrytools of Pharmacopeia is essential. Combinatorial chemistry andhigh-throughput screening have only recently become available as apowerful new instrument to systematically look for new andbiologically active compounds in an ocean of potentially interestingmolecules."

Shuster said Pharmacopeia's strategy centers on furtherimplementation of its technology and making progress with itscollaborators. Another area of focus will be on internal drugdiscovery for its own targets. And the company hopes to work withsmaller companies and academic institutions, areas Pharmacopeia hasnot yet addressed. "There's a tremendous opportunity there with awealth of new biological targets," he said. n

-- Jim Shrine

(c) 1997 American Health Consultants. All rights reserved.